Exhibit 10.1
EXECUTION COPY
MASTER FACILITY AGREEMENT
MASTER FACILITY AGREEMENT (the "AGREEMENT"), dated as of June 6, 2000, by
and between XXXX.XXX, INC., a Georgia corporation (the "COMPANY"), and FUSION
CAPITAL FUND II, LLC (together with its permitted assigns, the "BUYER").
WHEREAS:
Subject to the terms and conditions set forth herein, the Company has
authorized the entering into with the Buyer of up to two Equity Purchase
Agreements (each an "EQUITY PURCHASE AGREEMENT" and collectively the "EQUITY
PURCHASE AGREEMENTS"), substantially in the form attached hereto as EXHIBIT A,
with each Equity Purchase Agreement having an aggregate available amount of Six
Million Dollars ($6,000,000). The available amount of each Equity Purchase
Agreement shall be settled into shares of the Company's common stock, par value
$.01 per share (the "COMMON STOCK") (as settled, the "PURCHASE SHARES"), in
accordance with the terms of each Equity Purchase Agreement.
NOW THEREFORE, the Company and the Buyer hereby agree as follows:
1. ENTRY INTO EQUITY PURCHASE AGREEMENTS.
a. EXECUTION AND DELIVERY OF THE EQUITY PURCHASE AGREEMENTS. Subject to
the satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company and the Buyer agree as follows: (i) the execution and
delivery of the first Equity Purchase Agreement to be entered into under this
Agreement (the "FIRST EQUITY PURCHASE AGREEMENT") shall take place within five
(5) Trading Days (as defined in the last sentence of this Section 1(a)) of the
date that the Registration Statement referred to in the first sentence of
Section 4(a) hereof is declared effective under the Securities Act of 1933, as
amended (the "1933 ACT") by the United States Securities and Exchange Commission
(the "SEC") (the "FIRST CLOSING"); and (ii) the execution and delivery of the
second Equity Purchase Agreement to be entered into under this Agreement (the
"SECOND EQUITY PURCHASE AGREEMENT") shall take place within five (5) Trading
Days of the date that the Registration Statement referred to in the second
sentence of Section 4(a) hereof is declared effective under the 1933 Act by the
SEC (the "SECOND CLOSING"), (each such execution and delivery of an Equity
Purchase Agreement, a "CLOSING"). It is agreed and acknowledged by the parties
hereto that entering into the Second Equity Purchase Agreement shall be at the
option of the Company in its sole discretion until such time as the Company
shall have delivered an irrevocable written notice (the "SECOND CLOSING NOTICE")
to the Buyer stating that the Company elects to enter into the Second Equity
Purchase Agreement under the terms and conditions provided herein. The Second
Equity Purchase Agreement may not be entered into until the aggregate amount of
the First Equity Purchase Agreement is fully converted into Common Stock. The
Buyer is not obligated to enter into the Second Equity Purchase Agreement unless
the Company has delivered the Second Closing Notice prior to the date that is
ten (10) Trading Days following the date on which the aggregate amount of
the First Equity Purchase Agreement is fully converted into Common Stock.
Upon delivery of the Second Closing Notice to the Buyer, subject to the
satisfaction (or waiver) of the conditions set forth in Sections 6 and 7
below, the Company and the Buyer shall be obligated to enter into the Second
Equity Purchase Agreement. For purposes of this Agreement, "TRADING DAY"
shall mean any day on which the Principal Market (as defined in Section 4(d)
hereof) is open for customary trading.
b. CLOSING DATES. The date of each Closing (each a "CLOSING DATE")
shall be within five (5) Trading Days following the date of satisfaction (or
waiver) of the conditions to the Closing set forth in Sections 6 and 7 below (or
such later date as is mutually agreed to by the Company and the Buyer) with
respect to the Closing of each Equity Purchase Agreement.
2. BUYER'S REPRESENTATIONS AND WARRANTIES.
The Buyer represents and warrants to the Company that:
a. INVESTMENT PURPOSE. The Buyer is entering into the Equity Purchase
Agreements and acquiring the Commitment Shares (as defined in Section 7(b)
hereof) (collectively referred to herein as the "Securities"), for its own
account for investment only and not with a view towards, or for resale in
connection with, the public sale or distribution thereof; provided however, by
making the representations herein, the Buyer does not agree to hold any of the
Securities for any minimum or other specific term.
b. ACCREDITED INVESTOR STATUS. The Buyer is an "accredited investor" as
that term is defined in Rule 501(a)(3) of Regulation D.
c. RELIANCE ON EXEMPTIONS. The Buyer understands that the Securities
are being offered and sold to it in reliance on specific exemptions from the
registration requirements of United States federal and state securities laws and
that the Company is relying in part upon the truth and accuracy of, and the
Buyer's compliance with, the representations, warranties, agreements,
acknowledgments and understandings of the Buyer set forth herein in order to
determine the availability of such exemptions and the eligibility of the Buyer
to acquire the Securities.
d. INFORMATION. The Buyer has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Securities that have been reasonably
requested by the Buyer, including, without limitation, the SEC Documents (as
defined in Section 3(f) hereof). The Buyer understands that its investment in
the Securities involves a high degree of risk. The Buyer (i) is able to bear the
economic risk of an investment in the Securities including a total loss, (ii)
has such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of the proposed investment in the
Securities and (iii) has had an opportunity to ask questions of and receive
answers from the officers of the Company concerning the financial condition and
business of the Company and others matters related to an investment in the
Securities. Neither such inquiries nor any other due diligence investigations
conducted by the Buyer or its representatives shall modify, amend or affect the
Buyer's right to rely on the Company's representations and warranties contained
in Section
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3 below. The Buyer has sought such accounting, legal and tax advice
as it has considered necessary to make an informed investment decision with
respect to its acquisition of the Securities.
e. NO GOVERNMENTAL REVIEW. The Buyer understands that no United States
federal or state agency or any other government or governmental agency has
passed on or made any recommendation or endorsement of the Securities or the
fairness or suitability of the investment in the Securities nor have such
authorities passed upon or endorsed the merits of the offering of the
Securities.
f. TRANSFER OR RESALE. The Buyer understands that except as provided in
the Registration Rights Agreement (as defined in Section 6(a) hereof): (i) the
Securities have not been and are not being registered under the 1933 Act or any
state securities laws, and may not be offered for sale, sold, assigned or
transferred unless (A) subsequently registered thereunder or (B) an exemption
exists permitting such Securities to be sold, assigned or transferred without
such registration; (ii) any sale of the Securities made in reliance on Rule 144
may be made only in accordance with the terms of Rule 144 and further, if Rule
144 is not applicable, any resale of the Securities under circumstances in which
the seller (or the person through whom the sale is made) may be deemed to be an
underwriter (as that term is defined in the 0000 Xxx) may require compliance
with some other exemption under the 1933 Act or the rules and regulations of the
SEC thereunder; and (iii) neither the Company nor any other person is under any
obligation to register such securities under the 1933 Act or any state
securities laws or to comply with the terms and conditions of any exemption
thereunder.
g. VALIDITY; ENFORCEMENT. This Agreement has been duly and validly
authorized, executed and delivered on behalf of the Buyer and is a valid and
binding agreement of the Buyer enforceable against the Buyer in accordance with
its terms, subject as to enforceability to general principles of equity and to
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and
other similar laws relating to, or affecting generally, the enforcement of
applicable creditors' rights and remedies.
h. RESIDENCY. The Buyer is a resident of the State of Illinois.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Buyer that:
a. ORGANIZATION AND QUALIFICATION. The Company and its "SUBSIDIARIES"
(which for purposes of this Agreement means any entity in which the Company,
directly or indirectly, owns 50% or more of the voting stock or capital stock or
other similar equity interests other than XxxXxxx.xxx, Inc.) are corporations
duly organized and validly existing in good standing under the laws of the
jurisdiction in which they are incorporated, and have the requisite corporate
power and authority to own their properties and to carry on their business as
now being conducted. Each of the Company and its Subsidiaries is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which its ownership of property or the nature of the business
conducted by it makes such qualification necessary, except to the extent that
the failure to
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be so qualified or be in good standing could not reasonably be expected to have
a Material Adverse Effect. As used in this Agreement, "MATERIAL ADVERSE EFFECT"
means any material adverse effect on any of: (i) the business, properties,
assets, operations, results of operations or financial condition of the Company
and its Subsidiaries, if any, taken as a whole, (ii) the value of the Common
Stock or the value of the Equity Purchase Agreement, (iii) the transactions
contemplated hereby or by the agreements and instruments to be entered into in
connection herewith or (iv) the authority or ability of the Company to perform
its obligations under the Transaction Documents (as defined in Section 2(b)
hereof). The Company has no Subsidiaries except as set forth on SCHEDULE 3(a).
b. AUTHORIZATION; ENFORCEMENT; VALIDITY. (i) The Company has the
requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Equity Purchase Agreement, the
Registration Rights Agreement (as defined in Section 6(a) hereof) and each of
the other agreements entered into by the parties hereto in connection with the
transactions contemplated by this Agreement (collectively, the "TRANSACTION
DOCUMENTS"), and to issue the Securities in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction Documents by the
Company and the consummation by it of the transactions contemplated hereby and
thereby, including without limitation, the issuance of the Commitment Shares and
the reservation for issuance and the issuance of the Purchase Shares issuable
under the Equity Purchase Agreement, have been duly authorized by the Company's
Board of Directors and no further consent or authorization is required by the
Company, its Board of Directors or its shareholders, (iii) this Agreement has
been, and each other Transaction Document shall be at its respective Closing,
duly executed and delivered by the Company and (iv) this Agreement constitutes,
and each other Transaction Document shall constitute as of its respective
Closing, the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies.
c. CAPITALIZATION. As of the date hereof, the authorized capital stock
of the Company consists of (i) 20,000,000 shares of Common Stock, of which as of
the date hereof, 5,414,627 shares are issued and outstanding, none are held as
treasury shares, 3,000,000 shares are reserved for issuance pursuant to the
Company's stock option plan of which only approximately 1,000,000 shares remain
available and 52,500 warrants shares are issuable and reserved for issuance
pursuant to securities (other than the Equity Purchase Agreement or stock
options issued pursuant to the Company's stock option plan) exercisable or
exchangeable for, or convertible into, shares of Common Stock and (ii)
10,000,000 shares of preferred stock, no par value, of which as of the date
hereof no shares are issued and outstanding. All of such outstanding shares have
been, or upon issuance will be, validly issued and are fully paid and
nonassessable. Except in connection with the transaction with Fusion Capital
Fund I, LLC pursuant to that certain securities purchase agreement dated as of
November 15, 1999 and as disclosed in SCHEDULE 3(c), (i) no shares of the
Company's capital stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Company, (ii)
there are no outstanding debt securities, (iii) there are no outstanding
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, or contracts,
commitments, understandings or arrangements by
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which the Company or any of its Subsidiaries is or may become bound to issue
additional shares of capital stock of the Company or any of its Subsidiaries or
options, warrants, scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights convertible into, any
shares of capital stock of the Company or any of its Subsidiaries, (iv) there
are no agreements or arrangements under which the Company or any of its
Subsidiaries is obligated to register the sale of any of their securities under
the 1933 Act (except the Registration Rights Agreement), (v) there are no
outstanding securities or instruments of the Company or any of its Subsidiaries
which contain any redemption or similar provisions, and there are no contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to redeem a security of the Company or any
of its Subsidiaries, (vi) there are no securities or instruments containing
anti-dilution or similar provisions that will be triggered by the issuance of
the Securities as described in this Agreement and (vii) the Company does not
have any stock appreciation rights or "phantom stock" plans or agreements or any
similar plan or agreement. The Company has furnished to the Buyer true and
correct copies of the Company's Articles of Incorporation, as amended and as in
effect on the date hereof (the "ARTICLES OF INCORPORATION"), and the Company's
By-laws, as amended and as in effect on the date hereof (the "BY-LAWS"), and
summaries of the terms of all securities convertible into or exercisable for
Common Stock, if any, and copies of any documents containing the material rights
of the holders thereof in respect thereto.
d. ISSUANCE OF SECURITIES. The Commitment Shares have been duly
authorized and, upon issuance in accordance with the terms hereof, shall be
(i) validly issued, fully paid and non-assessable and (ii) free from all taxes,
liens and charges with respect to the issue thereof. 1,500,000 shares of Common
Stock have been duly authorized and reserved for issuance upon purchase under
each Equity Purchase Agreement. Upon issuance and payment therefore in
accordance with the terms and conditions of the Equity Purchase Agreement, the
Purchase Shares shall be validly issued, fully paid and nonassessable and free
from all taxes, liens and charges with respect to the issue thereof, with the
holders being entitled to all rights accorded to a holder of Common Stock.
e. NO CONFLICTS. Except as disclosed in SCHEDULE 3(e), the execution,
delivery and performance of the Transaction Documents by the Company and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the reservation for issuance and issuance of the
Purchase Shares) will not (i) result in a violation of the Articles of
Incorporation, any Certificate of Designations, Preferences and Rights of any
outstanding series of preferred stock of the Company or the By-laws or
(ii) conflict with, or constitute a default (or an event which with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Company or any of its
Subsidiaries is a party, or result in a violation of any law, rule, regulation,
order, judgment or decree (including federal and state securities laws and
regulations and the rules and regulations of the Principal Market applicable to
the Company or any of its Subsidiaries) or by which any property or asset of the
Company or any of its Subsidiaries is bound or affected which, in the case of
(ii), could not reasonably be expected to result in a Material Adverse Effect.
Except as disclosed in SCHEDULE 3(e), neither the Company nor its Subsidiaries
is in violation of any term of or in default under its Articles of
Incorporation, any
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Certificate of Designation, Preferences and Rights of any outstanding series
of preferred stock of the Company or By-laws or their organizational charter
or by-laws, respectively. Except as disclosed in SCHEDULE 3(e), neither the
Company nor any of its Subsidiaries is in violation of any term of or in
default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company or its Subsidiaries, except for possible
conflicts, defaults, terminations or amendments which could not reasonably be
expected to have a Material Adverse Effect. The business of the Company and
its Subsidiaries is not being conducted, and shall not be conducted, in
violation of any law, ordinance, regulation of any governmental entity,
except for possible violations, the sanctions for which either individually
or in the aggregate could not reasonably be expected to have a Material
Adverse Effect. Except as specifically contemplated by this Agreement and as
required under the 1933 Act, the Company is not required to obtain any
consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory agency
in order for it to execute, deliver or perform any of its obligations under
or contemplated by the Transaction Documents in accordance with the terms
hereof or thereof. Except as disclosed in SCHEDULE 3(e), all consents,
authorizations, orders, filings and registrations which the Company is
required to obtain pursuant to the preceding sentence have been obtained or
effected on or prior to the date hereof. Except as disclosed in
SCHEDULE 3(e), the Company is not and has not been since January 1, 1998,
in violation of the listing requirements of the Principal Market.
f. SEC DOCUMENTS; FINANCIAL STATEMENTS. Except as disclosed in
SCHEDULE 3(f), since January 1, 1999, the Company has timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC pursuant to the reporting requirements of the Securities Exchange Act of
1934, as amended (the "1934 ACT") (all of the foregoing filed prior to the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein being hereinafter
referred to as the "SEC DOCUMENTS"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the 1934
Act and the rules and regulations of the SEC promulgated thereunder applicable
to the SEC Documents, and none of the SEC Documents, at the time they were filed
with the SEC (except as they may have been correctly amended), contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. As of
their respective dates, the financial statements of the Company included in the
SEC Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied, during the
periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may exclude footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
g. ABSENCE OF CERTAIN CHANGES. Except as disclosed in SCHEDULE 3(g),
since March 31, 2000, there has been no material adverse change in the business,
properties, operations,
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financial condition or results of operations of the Company or its Subsidiaries.
The Company has not taken any steps, and does not currently expect to take any
steps, to seek protection pursuant to any bankruptcy law nor does the Company or
any of its Subsidiaries have any knowledge or reason to believe that its
creditors intend to initiate involuntary bankruptcy proceedings.
h. ABSENCE OF LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board, government agency,
self-regulatory organization or body pending or, to the knowledge of the Company
or any of its Subsidiaries, threatened against or affecting the Company, the
Common Stock or any of the Company's Subsidiaries or any of the Company's or the
Company's Subsidiaries' officers or directors in their capacities as such, which
could reasonably be expected to have a Material Adverse Effect. A description of
each action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body which, as
of the date of this Agreement, is pending or threatened in writing against or
affecting the Company, the Common Stock or any of the Company's Subsidiaries or
any of the Company's or the Company's Subsidiaries' officers or directors in
their capacities as such, is set forth in SCHEDULE 3(h).
i. ACKNOWLEDGMENT REGARDING BUYER'S PURCHASE OF THE SECURITIES. The
Company acknowledges and agrees that the Buyer is acting solely in the capacity
of arm's length purchaser with respect to the Transaction Documents and the
transactions contemplated hereby and thereby. The Company further acknowledges
that the Buyer is not acting as a financial advisor or fiduciary of the Company
(or in any similar capacity) with respect to the Transaction Documents and the
transactions contemplated hereby and thereby and any advice given by the Buyer
or any of its representatives or agents in connection with the Transaction
Documents and the transactions contemplated hereby and thereby is merely
incidental to the Buyer's purchase of the Securities. The Company further
represents to the Buyer that the Company's decision to enter into the
Transaction Documents has been based solely on the independent evaluation by the
Company and its representatives and advisors.
j. NO GENERAL SOLICITATION. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the 0000 Xxx) in connection with the offer or sale of the
Securities.
k. NO INTEGRATED OFFERING. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf has, directly or
indirectly, made any offers or sales of any security or solicited any offers to
buy any security, under circumstances that would require registration of any of
the Securities under the 1933 Act or cause this offering of the Securities to be
integrated with prior offerings by the Company for purposes of the 1933 Act or
any applicable shareholder approval provisions, including, without limitation,
under the rules and regulations of any exchange or automated quotation system on
which any of the securities of the Company are listed or designated, nor will
the Company or any of its Subsidiaries take any action or steps that would
require registration of any of the Securities under the 1933 Act or cause the
offering of the Securities to be integrated with other offerings.
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l. DILUTIVE EFFECT. The Company understands and acknowledges that the
number of Purchase Shares issuable upon settlement of the Equity Purchase
Agreement will increase in certain circumstances. The Company further
acknowledges that its obligation to issue Purchase Shares under the Equity
Purchase Agreement in accordance with the term and conditions of the Equity
Purchase Agreement is absolute and unconditional regardless of the dilutive
effect that such issuance may have on the ownership interests of other
shareholders of the Company.
m. INTELLECTUAL PROPERTY RIGHTS. The Company and its Subsidiaries own
or possess adequate rights or licenses to use all material trademarks, trade
names, service marks, service xxxx registrations, service names, patents, patent
rights, copyrights, inventions, licenses, approvals, governmental
authorizations, trade secrets and rights necessary to conduct their respective
businesses as now conducted. Except as set forth on SCHEDULE 3(m), none of the
Company's material trademarks, trade names, service marks, service xxxx
registrations, service names, patents, patent rights, copyrights, inventions,
licenses, approvals, government authorizations, trade secrets or other
intellectual property rights have expired or terminated, or, by the terms and
conditions thereof, could expire or terminate within two years from the date of
this Agreement. The Company and its Subsidiaries do not have any knowledge of
any infringement by the Company or its Subsidiaries of any material trademark,
trade name rights, patents, patent rights, copyrights, inventions, licenses,
service names, service marks, service xxxx registrations, trade secret or other
similar rights of others, or of any such development of similar or identical
trade secrets or technical information by others and, except as set forth on
SCHEDULE 3(m), there is no claim, action or proceeding being made or brought
against, or to the Company's knowledge, being threatened against, the Company or
its Subsidiaries regarding trademark, trade name, patents, patent rights,
invention, copyright, license, service names, service marks, service xxxx
registrations, trade secret or other infringement, which could reasonably be
expected to have a Material Adverse Effect.
n. ENVIRONMENTAL LAWS. The Company and its Subsidiaries (i) are in
compliance with any and all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or
other approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where, in each of the
three foregoing clauses, the failure to so comply could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
o. TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the Company
and its Subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in SCHEDULE 3(o) or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be made of such property by the Company and any of its
Subsidiaries. Any real property and facilities held under lease by the Company
and any of its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings by the
Company and its Subsidiaries.
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p. INSURANCE. The Company and each of its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as management of the Company believes to be prudent and
customary in the businesses in which the Company and its Subsidiaries are
engaged. Neither the Company nor any such Subsidiary has been refused any
insurance coverage sought or applied for and neither the Company nor any such
Subsidiary has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the Company
and its Subsidiaries, taken as a whole.
q. REGULATORY PERMITS. The Company and its Subsidiaries possess all
material certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct their
respective businesses, and neither the Company nor any such Subsidiary has
received any notice of proceedings relating to the revocation or modification of
any such certificate, authorization or permit.
r. TAX STATUS. The Company and each of its Subsidiaries has made or
filed all federal and state income and all other material tax returns, reports
and declarations required by any jurisdiction to which it is subject (unless and
only to the extent that the Company and each of its Subsidiaries has set aside
on its books provisions reasonably adequate for the payment of all unpaid and
unreported taxes) and has paid all taxes and other governmental assessments and
charges that are material in amount, shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith
and has set aside on its books provision reasonably adequate for the payment of
all taxes for periods subsequent to the periods to which such returns, reports
or declarations apply. There are no unpaid taxes in any material amount claimed
to be due by the taxing authority of any jurisdiction, and the officers of the
Company know of no basis for any such claim.
s. TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3(s) and other than the grant or exercise of stock options disclosed on
SCHEDULE 3(c), none of the officers, directors, or employees of the Company is
presently a party to any transaction with the Company or any of its Subsidiaries
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or such
employee or, to the knowledge of the Company, any corporation, partnership,
trust or other entity in which any officer, director, or any such employee has
an interest or is an officer, director, trustee or partner.
t. APPLICATION OF TAKEOVER PROTECTIONS. The Company and its board of
directors have taken all necessary action, if any, in order to render
inapplicable any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or other similar
anti-takeover provision under the Articles of Incorporation or the laws of the
state of its incorporation which is or could become applicable to the Buyer as a
result of the transactions
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contemplated by this Agreement, including, without limitation, the Company's
issuance of the Securities and the Buyer's ownership of the Securities.
u. RIGHTS AGREEMENT. The Company has not adopted a shareholder rights
plan or similar arrangement relating to accumulations of beneficial ownership of
Common Stock or a change in control of the Company.
v. FOREIGN CORRUPT PRACTICES. Neither the Company, nor any of its
Subsidiaries, nor any director, officer, agent, employee or other person acting
on behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company, used any corporate funds for any
unlawful contribution, gift, entertainment or other unlawful expenses relating
to political activity; made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds;
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or made any unlawful bribe, rebate, payoff,
influence payment, kickback or other unlawful payment to any foreign or domestic
government official or employee.
4. COVENANTS.
a. FILING REGISTRATION STATEMENT. The Company shall within five (5)
Trading Days from the date hereof file a new Registration Statement covering the
sale of at least 1,500,000 Purchase Shares underlying the First Equity Purchase
Agreement and the sale of 154,286 First Closing Commitment Shares (as defined in
Section 7(b)). The Company shall also within ten (10) Trading Days from the date
of the delivery to the Buyer of the Second Closing Notice: (i) file a new
Registration Statement covering the sale of a reasonable estimate of the number
of Purchase Shares underlying the Second Equity Purchase Agreement and a
reasonable estimate of the number of Second Closing Commitment Shares (as
defined in Section 7(b)). The Buyer and its counsel shall have a reasonable
opportunity to review and comment upon each such registration statement or
amendment to such registration statement and any related prospectus prior to its
filing with the SEC. The Company shall use its reasonable best efforts to have
such registration statements or amendments declared effective by the SEC at the
earliest possible date.
b. BLUE SKY. The Company shall, on or before the Closing Date, take
such action, if any, as the Company shall reasonably determine is necessary in
order to obtain an exemption for or to qualify the Commitment Shares and the
Purchase Shares for sale to the Buyer pursuant to this Agreement or the Equity
Purchase Agreement under applicable securities or "Blue Sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the Buyer on or prior to the Closing Date. The Company shall make all filings
and reports relating to the offer and sale of the Commitment Shares and the
Purchase Shares required under applicable securities or "Blue Sky" laws of the
states of the United States following the Closing Date.
c. NO VARIABLE PRICED FINANCING. Other than in connection with the
transaction with Fusion Capital Fund I, LLC and pursuant to this Agreement, the
Company agrees that beginning on the date of this Agreement and ending on the
date of termination of this Agreement (as provided in Section 9(k) hereof),
neither the Company nor any of its Subsidiaries shall, without the prior
10
written consent of the Buyer, contract for any equity financing (including any
debt financing with an equity component) or issue any equity securities of the
Company or any Subsidiary or securities convertible or exchangeable into or for
equity securities of the Company or any Subsidiary (including debt securities
with an equity component) which, in any case (i) are convertible into or
exchangeable for an indeterminate number of shares of common stock, (ii) are
convertible into or exchangeable for Common Stock at a price which varies with
the market price of the Common Stock, (iii) directly or indirectly provide for
any "re-set" or adjustment of the purchase price, conversion rate or exercise
price or (iv) contain any "make-whole" provision based upon, directly or
indirectly, the market price of the Common Stock, in each case, other than
reasonable and customary anti-dilution adjustments for issuance of shares of
Common Stock at a price which is below the market price of the Common Stock.
d. LISTING. The Company shall promptly secure the listing of all of the
Purchase Shares and Commitment Shares upon each national securities exchange and
automated quotation system, if any, upon which shares of Common Stock are then
listed (subject to official notice of issuance) and shall maintain, so long as
any other shares of Common Stock shall be so listed, such listing of all such
securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock's authorization for
quotation on The Nasdaq National Market (the "PRINCIPAL MARKET"). Neither the
Company nor any of its Subsidiaries shall take any action that would be
reasonably expected to result in the delisting or suspension of the Common Stock
on the Principal Market. The Company shall promptly, and in no event later than
the following Trading Day, provide to the Buyer copies of any notices it
receives from the Principal Market regarding the continued eligibility of the
Common Stock for listing on such automated quotation system or securities
exchange. The Company shall pay all fees and expenses in connection with
satisfying its obligations under this Section.
e. LIMITATION ON SHORT SALES AND HEDGING TRANSACTIONS. The Buyer agrees
that beginning on the date of this Agreement and ending on the date of
termination of this Agreement as provided in Section 9(k), the Buyer and its
agents, representatives and affiliates shall not in any manner whatsoever enter
into or effect, directly or indirectly, any (i) "short sale" (as such term is
defined in Rule 3b-3 of the 0000 Xxx) of the Common Stock or (ii) hedging
transaction, which establishes a net short position with respect to the Common
Stock; provided, however, that such restrictions shall not apply (i) if the
Buyer promptly submits after a sale of shares of Common Stock a Purchase Notice
(as defined in the Equity Purchase Agreement) entitling the Buyer to receive a
number of shares of Common Stock at least equal to the number of shares so sold
or (ii) if an Event of Default (as defined the Equity Purchase Agreement) has
occurred under the Equity Purchase Agreement including any failure by the
Company to timely issue any Purchase Shares pursuant to the Equity Purchase
Agreement.
f. LIMITATION ON SALES OF COMMITMENT SHARES. The Buyer agrees that
beginning on the date of this Agreement and ending on the date of termination of
this Agreement as provided in Section 9(k), the Buyer shall not transfer or sell
(i) the First Closing Commitment Shares (as defined in Section 7(b) hereof)
until the Maturity Date (as defined in the First Equity Purchase Agreement
notwithstanding any extension of the Maturity Date by the Company) or such date
as the First Equity Purchase Agreement has been terminated or has been fully
performed and (ii) the
11
Second Closing Commitment Shares (as defined in Section 7(b) hereof) until the
Maturity Date (as defined in the Second Equity Purchase Agreement
notwithstanding any extension of the Maturity Date by the Company) or such date
as the Second Equity Purchase Agreement has been terminated or has been fully
performed; provided, however, that such restrictions shall not apply: (i) in
connection with any transfers to or among affiliates (as defined in the
Securities Exchange Act of 1934, as amended), (ii) in connection with any pledge
in connection with a bona fide loan or margin account, or (iii) if an Event of
Default has occurred, or any event which, after notice and/or lapse of time,
would become an Event of Default, under the Equity Purchase Agreements including
any failure by the Company to timely issue Purchase Shares under an Equity
Purchase Agreement. Notwithstanding the forgoing, the Buyer may transfer
Commitment Shares to a third party in order to settle a sale made by the Buyer
where the Buyer reasonably expects the Company to deliver Purchase Shares to
Buyer under the Equity Purchase Agreement so long as the Buyer maintains
ownership of the same overall number of shares of Common Stock by "replacing"
the Commitment Shares so transferred with Purchase Shares when the Purchase
Shares are actually issued by the Company to the Buyer.
h. DUE DILIGENCE. The Buyer shall have the right, from time to time as
the Buyer may reasonably deem appropriate, to perform reasonable due diligence
on the Company during normal business hours. The Company and its officers and
employees shall reasonably cooperate with the Buyer in connection with any
reasonable request by the Buyer related to the Buyer's due diligence of the
Company.
5. TRANSFER AGENT INSTRUCTIONS.
The Company shall issue irrevocable instructions to its transfer agent,
and any subsequent transfer agent, to issue certificates, registered in the name
of the Buyer or its respective nominee(s), for the Purchase Shares (the
"IRREVOCABLE TRANSFER AGENT INSTRUCTIONS"). The Company warrants to the Buyer
that no instruction other than the Irrevocable Transfer Agent Instructions
referred to in this Section 5, will be given by the Company to its transfer
agent with respect to the Purchase Shares and that the Commitment Shares and the
Purchase Shares shall otherwise be freely transferable on the books and records
of the Company as and to the extent provided in this Agreement and the
Registration Rights Agreement subject to the provisions of Section 4(f) in the
case of the Commitment Shares. So long as a Registration Statement is available
for the sale of Commitment Shares and the Purchase Shares or if the Buyer
provides the Company with an opinion of counsel, in a generally acceptable form,
to the effect that a public sale, assignment or transfer of the Commitment
Shares or the Purchase Shares may be made without registration under the 1933
Act, the Company shall promptly instruct its transfer agent to issue one or more
certificates representing such shares in such name and in such denominations as
specified by the Buyer and without any restrictive legend. The Buyer hereby
confirms it shall comply with all securities laws and regulations applicable to
it including applicable prospectus delivery requirements upon sale of the
Commitment Shares or the Purchase Shares.
12
6. CONDITIONS TO THE COMPANY'S OBLIGATION TO ENTER INTO THE EQUITY
PURCHASE AGREEMENTS.
The obligation of the Company hereunder to enter into each Equity
Purchase Agreement with the Buyer at the respective Closing is subject to the
satisfaction, at or before the respective Closing Date, of each of the following
conditions, provided that these conditions are for the Company's sole benefit
and may be waived by the Company at any time in its sole discretion by providing
the Buyer with prior written notice thereof:
a. The Buyer shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company applicable to the
respective closing including: (i) the Equity Purchase Agreement substantially in
the form of EXHIBIT A hereto and (ii) the Registration Rights Agreement
substantially in the form of EXHIBIT B hereto (the "REGISTRATION RIGHTS
AGREEMENT").
b. Subject to the Company's compliance with Section 4(a), a
Registration Statement covering the sale of the respective Commitment Shares and
the Purchase Shares underlying the Equity Purchase Agreement shall have been
declared effective under the 1933 Act by the SEC and no stop order with respect
to the Registration Statement shall be pending or threatened by the SEC.
c. The representations and warranties of the Buyer shall be true and
correct in all material respects as of the date when made and as of each Closing
Date as though made at that time (except for representations and warranties that
speak as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Date.
7. CONDITIONS TO THE BUYER'S OBLIGATION TO ENTER INTO THE EQUITY PURCHASE
AGREEMENTS.
The obligation of the Buyer hereunder to enter into each Equity
Purchase Agreement at the respective Closing is subject to the satisfaction, at
or before the respective Closing Date, of each of the following conditions,
provided that these conditions are for the Buyer's sole benefit and may be
waived by the Buyer at any time in its sole discretion by providing the Company
with prior written notice thereof:
a. The Company shall have executed each of the Transaction Documents
and delivered the same to the Buyer applicable to the respective closing
including: (i) the Equity Purchase Agreement and (ii) the Registration Rights
Agreement substantially in the form of EXHIBIT B hereto.
b. On the Closing Date for the First Closing the Company shall have
delivered to the Buyer 154,286 shares of Common Stock (the "FIRST CLOSING
COMMITMENT Shares"). On the Closing Date for the Second Closing the Company
shall have delivered to the Buyer a number
13
of shares of Common Stock (the "SECOND CLOSING COMMITMENT SHARES" and together
with the First Closing Commitment Shares, the "COMMITMENT SHARES") equal to 8%
of $6,000,000 divided by the lower of (A) the arithmetic average of the Closing
Bid Prices (as defined in the Equity Purchase Agreement) of the Common Stock for
the five (5) consecutive Trading Days immediately preceding the Trading Day
which is two (2) Trading Days prior to the Second Closing and (B) the arithmetic
average of the Closing Bid Prices of the Common Stock for the five (5)
consecutive Trading Days immediately preceding the date of the Second Closing
Notice. The number of Commitment Shares shall be appropriately adjusted for any
reorganization, recapitalization, non-cash dividend, stock split or other
similar transaction.
c. The Common Stock shall be authorized for quotation on the Principal
Market, trading in the Common Stock shall not have been within the last 365 days
suspended by the SEC or the Principal Market and the Purchase Shares and the
Commitment Shares shall be approved for listing upon the Principal Market.
d. The Buyer shall have received the opinions of the Company's legal
counsel dated as of the Closing Date in the form of EXHIBIT C attached hereto.
e. The representations and warranties of the Company shall be true and
correct in all material respects (except to the extent that any of such
representations and warranties is already qualified as to materiality in Section
3 above, in which case, such representations and warranties shall be true and
correct without further qualification) as of the date when made and as of the
respective Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied with the covenants, agreements and conditions
required by the Transaction Documents to be performed, satisfied or complied
with by the Company at or prior to the Closing Date. The Buyer shall have
received a certificate, executed by the CEO, President or CFO of the Company,
dated as of the Closing Date, to the foregoing effect in the form attached
hereto as EXHIBIT D.
f. The Board of Directors of the Company shall have adopted resolutions
in the form attached hereto as EXHIBIT E which shall be in full force and effect
without any amendment or supplement thereto as of the Closing Date.
g. As of the Closing Date, the Company shall have reserved out of its
authorized and unissued Common Stock, solely for the purpose of effecting
issuances under the Equity Purchase Agreement, at least 1,500,000 shares of
Common Stock.
h. The Irrevocable Transfer Agent Instructions, in the form of
EXHIBIT F attached hereto, shall have been delivered to and acknowledged in
writing by the Company and the Company's transfer agent.
i. The Company shall have delivered to the Buyer a certificate
evidencing the incorporation and good standing of the Company in the State of
Georgia issued by the Secretary of State of the State of Georgia as of a date
within ten (10) Trading Days of the Closing Date.
14
j. The Company shall have delivered to the Buyer a certified copy of
the Articles of Incorporation as certified by the Secretary of State of the
State of Georgia within ten (10) Trading Days of the Closing Date.
k. The Company shall have delivered to the Buyer a secretary's
certificate executed by the Secretary of the Company, dated as of the respective
Closing Date, in the form attached hereto as EXHIBIT G.
l. A Registration Statement covering the sale of all of the respective
Commitment Shares and Purchase Shares underlying the Equity Purchase Agreement
shall have been declared effective under the 1933 Act by the SEC and no stop
order with respect to the Registration Statement shall be pending or threatened
by the SEC. The Company shall have prepared and delivered to the Buyer a final
form of Prospectus to be used by the Buyer in connection with any sales of any
Commitment Shares or any Purchase Shares. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Commitment Shares and the Purchase Shares
pursuant to this Agreement and the Equity Purchase Agreement in compliance with
such laws.
m. No Event of Default (as defined in the Equity Purchase Agreement)
has occurred, or any event which, after notice and/or lapse of time, would
become an Event of Default under the Equity Purchase Agreement has occurred.
8. INDEMNIFICATION. In consideration of the Buyer's execution and delivery
of the Transaction Documents and acquiring the Securities thereunder and in
addition to all of the Company's other obligations under the Transaction
Documents, the Company shall defend, protect, indemnify and hold harmless the
Buyer and each other holder of the Securities and all of their shareholders,
officers, directors, employees and direct or indirect investors and any of the
foregoing person's agents or other representatives (including, without
limitation, those retained in connection with the transactions contemplated by
this Agreement) (collectively, the "INDEMNITEES") from and against any and all
actions, causes of action, suits, claims, losses, costs, penalties, fees,
liabilities and damages, and expenses in connection therewith (irrespective of
whether any such Indemnitee is a party to the action for which indemnification
hereunder is sought), and including reasonable attorneys' fees and disbursements
(the "INDEMNIFIED LIABILITIES"), incurred by any Indemnitee as a result of, or
arising out of, or relating to (a) any misrepresentation or breach of any
representation or warranty made by the Company in the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby,
(b) any breach of any covenant, agreement or obligation of the Company contained
in the Transaction Documents or any other certificate, instrument or document
contemplated hereby or thereby, or (c) any cause of action, suit or claim
brought or made against such Indemnitee and arising out of or resulting from the
execution, delivery, performance or enforcement of the Transaction Documents or
any other certificate, instrument or document contemplated hereby or thereby. To
the extent that the foregoing undertaking by the Company may be unenforceable
for any reason, the Company shall make the maximum contribution to the payment
and satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
15
9. GOVERNING LAW; MISCELLANEOUS.
a. GOVERNING LAW; JURISDICTION; JURY TRIAL. The corporate laws of the
State of Georgia shall govern all issues concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the other
Transaction Documents shall be governed by the internal laws of the State of
Illinois, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Illinois or any other jurisdictions)
that would cause the application of the laws of any jurisdictions other than the
State of Illinois. Each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the City of Chicago, for
the adjudication of any dispute hereunder or under the other Transaction
Documents or in connection herewith or therewith, or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably waives, and
agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of any such court, that such suit, action
or proceeding is brought in an inconvenient forum or that the venue of such
suit, action or proceeding is improper. Each party hereby irrevocably waives
personal service of process and consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such party at the
address for such notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
b. COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party; provided that a facsimile signature
shall be considered due execution and shall be binding upon the signatory
thereto with the same force and effect as if the signature were an original, not
a facsimile signature.
c. HEADINGS. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. SEVERABILITY. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction.
e. ENTIRE AGREEMENT; AMENDMENTS. This Agreement supersedes all other
prior oral or written agreements between the Buyer, the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement, the Other Transaction Documents and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or
16
therein, neither the Company nor the Buyer makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be amended other than by an instrument in writing signed by the
Company and the Buyer, and no provision hereof may be waived other than by an
instrument in writing signed by the party against whom enforcement is sought.
f. NOTICES. Any notices, consents, waivers or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and will be deemed to have been delivered: (i) upon receipt, when
delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically or electronically generated and
kept on file by the sending party); or (iii) one Trading Day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:
If to the Company:
xxxx.xxx, Inc
0000 XxxxxXxxx Xxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx Xx.
With a copy to:
King & Spalding
000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 404-572-5100
Attention: Xxxxxx X. Xxxx
If to the Buyer:
Fusion Capital Fund II, LLC
000 Xxxxxxxxxxx Xxxx Xxxxx, Xxxxx 0-000
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxx
with a copy to:
Ungaretti & Xxxxxx
3500 Three First Xxxxxxxx Xxxxx
00
Xxxxxxx, Xxxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 312-977-4405
Attention: Xxxxx X. Xxxxxxxxxx
If to the Transfer Agent:
American Stock Transfer
0000 00xx Xxxxxx, Xxxxx Xxxxx
Xxxxxxxx, XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxx
or at such other address and/or facsimile number and/or to the attention of such
other person as the recipient party has specified by written notice given to
each other party three (3) Trading Days prior to the effectiveness of such
change. Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service, shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.
g. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
including any transferee of an Equity Purchase Agreement. The Company shall not
assign this Agreement or any rights or obligations hereunder without the prior
written consent of the Buyer, including by merger or consolidation. The Buyer
may not assign its rights under this Agreement without the consent of the
Company, other than to an affiliate of the Buyer controlled by Xxxxxx X. Xxxxxx
or Xxxxxx X. Xxxxxxxxxx. Notwithstanding anything to the contrary contained in
the Transaction Documents, the Buyer shall be entitled to pledge the Commitment
Shares and the Purchase Shares in connection with a bona fide loan or margin
account.
h. NO THIRD PARTY BENEFICIARIES. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. PUBLICITY. The Company and the Buyer shall have the right to approve
before issuance any press releases or any other public disclosure (including any
filings with the SEC) with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the prior
approval of any Buyer, to make any press release or other public disclosure
(including any filings with the SEC) with respect to such transactions as is
required by applicable law and regulations (although the Buyer shall be
consulted by the Company in connection with any
18
such press release or other public disclosure prior to its release and shall be
provided with a copy thereof).
j. FURTHER ASSURANCES. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
k. TERMINATION; SURVIVAL. This Agreement may be terminated only as
follows:
(i) By the Buyer any time after an Event of Default (as defined in the
Equity Purchase Agreement) has occurred.
(ii) In the event that the First Closing shall not have occurred, the
Company shall have the option to terminate this Agreement for any reason or
for no reason without liability of any party to any other party. If this
Agreement is terminated pursuant to this Section 9(k)(ii), the Company
shall issue to the Buyer the First Closing Commitment Shares immediately
prior to the termination hereof. The number of First Closing Commitment
Shares shall be appropriately adjusted for any reorganization,
recapitalization, non-cash dividend, stock split or other similar
transaction.
(iii) In the event that the First Closing shall not have occurred on
or before August 31, 2000, due to the failure to satisfy the conditions set
forth in Sections 6 and 7 above with respect to the Closing (and the
nonbreaching party's failure to waive such unsatisfied condition(s)), the
nonbreaching party shall have the option to terminate this Agreement at the
close of business on such date without liability of any party to any other
party. If this Agreement is terminated pursuant to this Section 9(k)(iii)
prior to the Closing other than solely as a result of any material breach
of the Buyer's obligation hereunder, the Company shall issue to the Buyer
the First Closing Commitment Shares immediately upon the termination
hereof. The number of First Closing Commitment Shares shall be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.
(iv) If the First Equity Purchase Agreement has been entered into as
provided herein, by the Company any time after the date the First Equity
Purchase Agreement has been fully performed but prior to the delivery to
the Buyer of the Second Closing Notice.
(v) If the First Equity Purchase Agreement has been entered into as
provided herein, by either the Company or the Buyer if the First Equity
Purchase Agreement has been fully performed and the Company has not
delivered a Second Closing Notice to the Buyer on or prior to the tenth
(10th) Trading Day after the First Equity Purchase Agreement has been fully
performed.
19
(vi) If the First Equity Purchase Agreement has been entered into as
provided herein, the First Equity Purchase Agreement has been fully
performed and the Company has delivered a Second Closing Notice to the
Buyer, in the event that the Second Closing shall not have occurred on or
before twenty (20) Trading Days from the date of the Second Closing Notice
due to the failure to satisfy the conditions set forth in Sections 6 and 7
above with respect to the Second Closing (and the nonbreaching party's
failure to waive such unsatisfied condition(s)), the nonbreaching party
shall have the option to terminate this Agreement at the close of business
on such date without liability of any party to any other party. If this
Agreement is terminated pursuant to this Section 9(k)(vi) prior to the
Second Closing other than solely as a result of a material breach of the
Buyer=s obligation hereunder, the Company shall issue to the Buyer the
Second Closing Commitment Shares immediately upon the termination hereof.
In the such case, the number of Second Closing Commitment Shares shall be
equal to 8% of $6,000,000 divided by the lower of (A) the arithmetic
average of the Closing Bid Prices of the Common Stock for the five (5)
consecutive Trading Days immediately preceding the Trading Day which is
two (2) Trading Days prior to the date of termination of this Agreement and
(B) the arithmetic average of the Closing Bid Prices of the Common Stock
for the five (5) consecutive Trading Days immediately preceding the date
of the Second Closing Notice. The number of Commitment Shares shall be
appropriately adjusted for any reorganization, recapitalization, non-cash
dividend, stock split or other similar transaction.
(vii) If either Equity Purchase Agreement is terminated by either
party pursuant to its terms without using the full available amount to
purchase Common Stock, this Agreement shall automatically terminate at such
time or this Agreement shall automatically terminate on the date the
available amount under the Second Equity Purchase Agreement has been fully
converted into Common Stock.
Except for termination of this Agreement under Section 9(k)(vii), any
termination of this Agreement pursuant to this Section 9(k) shall be effected by
written notice from the Company to the Buyer, or the Buyer to the Company, as
the case may be, setting forth the basis for the termination hereof. A
termination of this Agreement under Section 9(k)(vii) shall automatically occur
on such date as the Equity Purchase Agreement has been terminated by either
party pursuant to its terms without fully using the available amount to purchase
shares of Common Stock or on such date as the aggregate available amount of the
Second Equity Purchase Agreement has been fully used to purchase shares of
Common Stock, in each case, without any action or notice on the part of any
party. Except as expressly set forth in this Agreement, the representations and
warranties of the Company and the Buyer contained in Sections 2 and 3 hereof,
the indemnification provisions set forth in Section 8 hereof and the agreements
and covenants set forth in Section 9, shall survive the Closing and any
termination hereof.
l. FINANCIAL ADVISOR. The Company acknowledges that it has not engaged
any financial advisor, placement agent, broker or finder in connection with the
transactions contemplated hereby. The Company shall be responsible for the
payment of any fees or commissions, if any, of any financial advisor, placement
agent, broker or finder relating to or arising out of the transactions
contemplated hereby. The Company shall pay, and hold the Buyer harmless against,
any liability,
20
loss or expense (including, without limitation, attorneys' fees and out of
pocket expenses) arising in connection with any such claim.
m. NO STRICT CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rules of strict construction will be applied
against any party.
n. REMEDIES. The Buyer shall have all rights and remedies set forth in
the Transaction Documents and all of the rights and remedies available under
applicable laws. Any person having any rights under any provision of the
Transaction Documents shall be entitled to enforce such rights specifically
(without posting a bond or other security), to recover damages by reason of any
breach of any provision of the Transaction Documents and to exercise all other
rights granted by law.
* * * * * *
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IN WITNESS WHEREOF, the Buyer and the Company have caused this Master
Facility Agreement to be duly executed as of the date first written above.
THE COMPANY:
XXXX.XXX, INC.
By: /s/ Xxxxxx X. Xxxxxx, Xx.
------------------------------------------
Name: Xxxxxx X. Xxxxxx, Xx.
Title: Chairman of the Board and
Chief Executive Officer
BUYER:
FUSION CAPITAL FUND II, LLC
BY: FUSION CAPITAL PARTNERS II, LLC
BY: SGM HOLDINGS CORP.
By: /s/ Xxxxxx Xxxxxx
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: President
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